Biofuel advocates have formed a new lobbying group, the Alliance for Abundant Food and Energy, to promote the development of biofuels and to raise public awareness of how the agriculture industry can help us grow our way out of food and fuel shortages. The group is spearheaded by ag powerhouses like Archer Daniels Midland, Monsanto, DuPont, Deere & Co., and others.
Despite the heavy hitters on the Alliance team, they face an uphill battle in Congress and in the public eye. The recent arguments over whether corn-based biofuel is driving food prices worldwide (short version: probably not) have nonetheless increased a feeling among the general public that biofuel is problematic. The Alliance’s legislative agenda is simple: keep the 51-cents a gallon subsidy for production of corn biofuel, and keep the tariff hedge up against Brazilian sugarcane-based ethanol.
Other big-ag players oppose the Alliance’s position. Most notable is Tyson Foods, which says its profit margins have gone into the dirt as a result of spiraling feed prices, which they blame on the use of corn for ethanol production. The established lobbying group Grocery Manufacturers’ Association is strongly opposed to the use of food crops in biofuel productions. We can look for a clash of the titans in the lobbying arena, as the companies involved really do have vested interests in opposite outcomes.
Farmers, interestingly enough, have less of a dog in this fight than you might guess. Farmers don’t get the ethanol subsidy – the distillers get that money. So the loss of the 51 cents a gallon might reduce demand for corn at the ethanol distilleries if ADM and other distillers decide to cut production – but it won’t directly take money out of the farmer’s pockets. Similarly, lowering or removing the tariffs on Brazilian ethanol might relieve some of the price pressure on corn, but won’t directly hit farmers. These tariffs and subsidies are a game being played by the big distillery producers, and it’s tough to predict what the real impact on corn prices at the elevator would be. My guess is, the combination of losing the subsidy and losing the tariff (which isn’t even on the table at the moment, and the Alliance is fighting to keep it that way) would have a very modest deflationary effect on corn prices in the short term, and in the long term wouldn’t make a difference either way.











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